The widening gyre: PC sales fall for a record-breaking fifth quarter

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PC sales are in serious trouble. According to Gartner, sales contracted a further 10.9% in Q2 2013 with total shipments falling to 76 million units. What’s worse, for PC vendors, is that the stated explanations for why sales are cratering have nothing to do with Windows 8, ultrabook prices, or weak macroeconomic conditions. The problem, in a word, is tablets. At this point, Lenovo, HP, Dell, Acer, and Asus are slugging it out amongst each other for pieces of a shrinking pie.

That said, of the top five OEMs, Lenovo is clearly winning the fight. The company snapped up 16.7% of the total market in Q2 2013, up from 14.9% in Q2 2012. That increase was almost enough to offset the decline in unit volume, from 12.76 million systems in 2012 to 12.67 million in 2013. No one else got off so lightly; HP and Dell both shrank (4% and 5% respectively) while Asus took a 21% year-on-year decline. Acer got hit even worse, with a 35.3% decline in sales. The steep sales drops from both companies are linked to their decision to exit the high-volume/low-margin netbook markets.

Regional trends

In emerging markets, Asia-Pacific, and EMEA (Europe, the Middle East, and Africa) tablets generally ate everybody’s lunch. North American trends were a bit brighter, where PC sales were down just 1.4% compared to Q2 2012. The US market also grew 8.5% sequentially, which isn’t too shabby under the circumstances. This is attributed to an uptick in professional sales and, possibly, the end of Windows XP. In the US market, Dell picked up an additional 6.4% of the market from Q2 2012 through Q2 2013, while Apple (non-iPad), HP, and Toshiba sales all declined. Lenovo was the biggest mover year-on-year, with 10.1% of the market in Q2 2013, up from 8.3% in 2012 (a gain of 19.7%).

The United States, however, is a tiny bit of upside in an ocean of bad news. Worldwide, tablets are chewing into the PC business at a ferocious rate; Gartner claims that they’ve become the first device of choice over a low-cost desktop or laptop in developing markets.

Mounting desperation

If Gartner is right, the PC market is going to be downright interesting these next few months. No one believes that Windows 8 is responsible for the downturn in the market any longer. Microsoft’s new OS may have done nothing to ignite the market, but it’s not responsible for a sudden surge in Android tablet sales. Furthermore, Windows 8 on tablets has always come off as a far better product than its desktop/laptop equivalent. Ultrabooks may not have moved heaven and Earth, but no one is pinning the blame on them, either.

It’s only been two years since the first armada of Android tablets sallied forth to do battle with Apple’s iPad, slammed into the storm of consumer expectations, and sank. Windows 8 tablets may be at a similar point in their life cycles, but the PC OEMs don’t have margins enough to survive protracted battles for minimal market share against Android tablets. AMD could clean up this fall if beleagured companies launch Temash-based hardware in a bid for relevance, but only if those products then sell in volume. Intel, of course, has Bay Trail coming, but that launch isn’t expected until the end of the year.

If the back-to-school and professional markets don’t drive significantly more PC sales than expected it’s going to be an ugly fall. HP’s talk of spinning off the PC unit is starting to look prescient. The company’s claims of returning to the smartphone market after wasting all the goodwill and expertise it acquired when it bought Palm illustrate how bad things have gotten, while Dell struggles to take itself private, Carl Icahn’s machinations notwithstanding.

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Sure, blame tablets. But lets remember why a lot of professional users don’t care about upgrading.

Firstly – little to no generational performance increase. Haswell simply isn’t much of an upgrade if you want more power, and there is an argument that Sandy Bridge overclocks better.

Secondly – Windows 8’s awful interface. Why on Earth would a professional want to pay to have a familiar interface replaced by something resembling a giant phone?

Obviously tablets are going to take some of the sales, but I wouldn’t blame them entirely.

Joel Hruska

VM,

The problem goes back farther than that. Intel has talked about an eight-year desktop replacement cycle, for example. And weak W8 sales don’t account for adoption rates that are barely matching Vista.

It’s not hard to see the connections. Tablet sales are skyrocketing in consumer products while sales of other PCs are being forced out. I’ve seen it with friends and family as welll — people whon’t *need* a keyboard are opting for different systems.

VirtualMark

Which is precisely the reason Microsoft should be supporting their pro customers, instead of trying to force them to use a touch interface.

some_guy_said

MS has a great touch interface (the best touch interface in my opinion, aside from the stupid tiles/start screen.) – they just need to not screw over their desktop users with the touch paradigm.

mori bund

I’ve bought my last new PC 3 years ago. Before that I bought a new PC all 2-3 years, because I needed better performance.
Now the 3 years old hardware still works great. Maybe a new graphic card, but that’s it. There’s no need for a new PC for a few years, because PCs have reached a plateau performance-wise.
And that’s not just me – everyone I know says the same.

On the other hand:
I don’t know anyone who buys a tablet INSTEAD of a PC.
Every tablet user I know has at least one PC at home and will continue to use a PC for the appropriate tasks.

But I understand why the industry will see the PC dead rather today than tomorrow: you can upgrade a PC, but you have to buy a new tablet when your old one isn’t good enough anymore…

Joel Hruska

Moribund,

You aren’t seeing the problem. Let me explain.

Back in 2009, Intel launched netbooks. Tons of people went out and bought them — so many that Intel had to increase Atom production. Those sales were supplemental — people who already owned PCs bought another PC. Everybody made money.

Now, people who bought a PC three years ago aren’t buying PCs. Instead, they buy a nifty new tablet. Intel makes no money. Dell, HP, and Lenovo make no money, because they don’t have any tablets that people are buying.

You say “The PC isn’t dead!” But if my business is based on the assumption that people buy PCs every three years, and people start only replacing PCs every eight years, that has a *crippling* impact on my volume. And remember, we’re talking about an industry where profit margins are typically 2-3% in the consumer space. Dell *only* makes money because it ships millions and millions of boxes.

mori bund

Hm, I understand that this is the problem.
I just think that I have a different opinion what causes it.^^
So the point is, while the PC isn’t dead, the PC selling business is.

What causes the PC sales fall makes maybe no difference for Dell, HP, Lenovo, etc – but it makes a difference for Microsoft:
Microsoft obviously thinks, they can start to ignore the desktop users now, because of the misapprehension, when people don’t buy PCs they also don’t use PCs. And this is a mistake.

some_guy_said

The tablet is starting to replace a large fraction of what would be PC sales.

The PC won’t die, but PC companies need to prepare for the near future, when the market is simply much smaller.

Jamie MacDonald

Do these sales track pre-built units or copies of Windows sold?

Because I know that around here pre-built PCs simply do not get sold, but many are assembled from their component parts by gamers.

The problem is that there’s two types of PC imo. Grandma’s DOSmachine that rattles in the corner of her bedroom, rarely used, and a gamer PC. Neither are really required to upgrade, and games aren’t hammering processors like they used to since they started dumbing down to fit console hardware and are generally more efficiently programmed.

Joel Hruska

Sales of vendor systems track sales as reported by outlets and refer to *sales* not *shipments.*

mori bund

In a few years tablets and smartphone will be in the same situation according the generational performance increase, and people won’t see the need to buy a new tab/smartphone every two years but rather every five years.
I wonder if then the “experts” will tell us, that “the tabs & smartphones are dead!”

E.g. Samsung has already troubles, that the sgs4 isn’t selling that well as expected.
I think it’s because SGS2/3 users don’t see the need for a slightly better hardware so soon.
(And I’m a sgs3 user myself.)

VirtualMark

Yeah I totally agree – I’ve said this before about smartphones. I love smartphones, but don’t own one of the top ones as I just don’t see the need for a ton of computing power in a 4-5 inch device. There’s not a lot an S4 can do that I need, or that my phone can’t do.

tgrech

I think you’re vastly over estimating how much the workstation/enthusiast/HPC make up of the market. Most people who buy PCs are normal people, or professionals who just need something to browse/email/word process. I’ve seen professionals from government officials(Health and safety from my experience) to architects to builders use tablets in their workspace. I also know many schools here are replacing large numbers of their desktop PCs with tablets, and I presume there is a similar trend across many other professional areas.
People arn’t looking to upgrade because they want more power systems with more features, often they’re “upgrading” because they have too much power and too many features for their needs now.

hmmm

People make too much of this. Yes, PC sales are declining. Truth is a lot of people dont need them. We all know people who do nothing on a PC other than surf the net, video/audio playback, create/edit documents etc. None of those people ever needed PCs in the first place. It just so happened that there was nothing else that could do what they needed. If video game consoles didnt exist, PC sales would be higher to make up the difference. PC sales will keep dropping till we get to a niche market, mostly filled with developers, graphic designers, hard-core gamers etc. Its the evolution of technology, and not “THE PC IS DEAD!!!” as people like to scream.

Joel Hruska

“Its the evolution of technology, and not “THE PC IS DEAD!!!” as people like to scream.”

For the consumer, that’s true. For Dell or HP, that’s terrifying. Not only do these companies lack products, they lack mindshare and a solid base to launch it from.

Look at it this way: How many of the top mainframe manufacturers effectively transitioned to the PC market? How many minicomputer manufacturers? How many of the big iron server manufacturers made the transition from late RISC architectures to x86?

Some did. A lot of them didn’t, or did so only by killing in-house development.

mori bund

How many people do you know who have a tablet INSTEAD of a PC? (I don’t know anyone.)
How many people do you know who feel the need hardware-wise to buy a new PC every 2 years, like e.g. a decade ago? (I don’t know anyone.)

Joel Hruska

How many people do you know who have a tablet INSTEAD of a PC? (I don’t know anyone.)

I know four people who opted for tablets instead of PCs in the past 12 months, when their current PCs died. It surprised me. As someone who writes for a living, I assumed everyone wanted a keyboard as much as I did.

mori bund

Interesting!
You’re the first one who told me something like that.
Would these four people actually have bought a PC, if they haven’t opted for a tab?

tgrech

I also know that tens of schools in the UK opted for tablets instead of PC refreshes recently, with volumes being anywhere from 30-180 units(Fitting into the usual 30-child/class system), these were normally iPads or various types of Windows Tablets(For free Office), as well as one friend(iPad) and two family members(Kindle FireHD).

http://www.facebook.com/profile.php?id=1223563048 Angel Ham

What kind of OS was in those tablets?

jason parks

Its because um …. lets see my 4-5 year old computer has Intel I7 Sold state HD/ 8 Gig ram. … windows 7….
I dont see having to upgrade for long time.

There isnt anything that is pushing Hardware any more, software hasnt caught up.
while ppls home computers are powerful enough to do what they need whats the point of buying a new computer?

Sure i have a Kindle but i use my PC everyday and i play games on it, The games really dont push my computer at all, I do upgrade my VD card every 2 years..

ATI 7950 atm..

Maybe they should think about why, instead of everyone blaming Tablets..

Jamie MacDonald

Even Crysis 3 wasn’t a punishing game like the first one. Crysis 1 was horribly inefficient in addition to being pretty. That just doesn’t fly anymore.

http://www.facebook.com/profile.php?id=1223563048 Angel Ham

Sandy Bridge happened. It hit the sweet spot for the Good Enough performance for basic things like web surfing, video, document editing and light gaming. Pair it with a decent video card and you’re likely to not bother upgrading for at least two to three more years.

Roberto Tomás

I think it is interesting that Intel is not pushing 14nm earlier, but rather later — at least on the desktop. Because it needs all the ammunition it can get. Im not saying its the wrong call or sad news for PCs or anything, it is just counter intuitive.
PCs, or things effectively very like them, will always have a place in business markets. Both for servers and for actual machines attached to real desks. But for consumer use, and general computing, mobile devices and “personal cloud” or cloud-offloading are clearly the way forward. I think Intel has a shot at getting a good grip on the market, extending the traditional x86 software life-cycle, if it were to push very tablet-like convertibles instead of desktops and ultrabooks. We’ll have to see. :)

Stacey Bright

Info that I’d like to see tied to this article is info on component sales. Other wise its just about OEMs doing poorly and not so much about the PC industry as a whole. I have never personally purchased an OEM computer, if I ever did it would be laptop since I can’t DIY build one. I just haven’t needed a personal laptop because my job has supplied me with one or several for the last 10-11 years. In that same time period I have built my own desktops, and those for friends and family members. Most anybody with an OEM PC from at least 4 years ago has limited reason to purchase a brand new one outright. I have never been interested in tablets, as I don’t need a bigger version of my phone, that doesn’t send or receive phone calls. Most of my computing needs/desires require X86 hardware, plus I have a general dislike of onscreen keyboards.

Daniel Revas

Actually you can build a DIY Laptop. There are kits that give you the foundation and you add your own goodies. I haven’t done one since 2009 or 2010, but you can. Though I don’t really recommend it. :)

Daniel Revas

I would also like to know if Gartner tracks sales from companies like CyberPower or Falcon Northwest, or do they take into account the DIY market at all? Newegg and TigerDirect are flourishing, and I don’t believe it’s Tablets driving their sales.
I guess what I’m trying to say is that it isn’t as bleak as they make it out to be. The numbers are suspect. It’s like charting Game sales without charting Digital distribution but only counting Retail, which has been the practice up until now. You can’t get a real picture that way.
We are living at a time of dizzying technological innovation. We have more choices than ever. There is bound to be some shakeout. The PC however, is far from dead.

Joel Hruska

“I would also like to know if Gartner tracks sales from companies like CyberPower or Falcon Northwest, or do they take into account the DIY market at all? ”

Yes. Those companies are “Other.” If you are a whitebox builder of sufficient volume, you’re counted. I don’t know what the volume cutoff is.

This is not a measure of component sales, no. Component sales, however, are typically fractional and some of them go into whiteboxes as above.

Daniel Revas

Sorry, but I didn’t see “other” on the chart. I also question your conclusion about component sales being “fractional”. Owning a small shop I don’t build a lot of machines every year, but multiply what I build by thousands of small Computer Shops, then you get appreciable numbers of custom built units being sold. We get our parts from a wide array of sources, but Newegg and Tiger get a lot of that business. So my basic point, that Gartner really doesn’t know how many PC’s are actually being sold is accurate, at least in my opinion. I’ve only been at this for 15 years, so I don’t lay claim to any particular wisdom on the subject, but when I look at the methodology, like with Game sales that up until now ignored Digital distribution, it looks an awful lot like government accounting.

Ian Skinner

Really getting tired of writers who have nothing to talk about so they create a non existent ‘crisis ‘. Writing like this belongs in the 50 cent tabloids found at the supermarket where actual facts don’t really matter if you can pull a snippet out of context and run with it.

Joel Hruska

I’ll make you a bet. If Dell, HP, AMD, and Intel don’t speak strongly to this problem and emphasize their plans to reverse what is now the longest downturn in the PC market in history, I’ll buy you a cookie.

Phobos

Don’t be so cheap at least throw in a glass of milk.

Joel Hruska

But then he’ll want a muffin!

Phobos

milk and cookies go together, can’t have one without the other.

Dozerman

I have been using desktops all of my computing life, and I can proudly say that I have never bought a single OEM desktop. I know there are a lot of people like me, too, people who build their own systems. The prebuilt system sector may be failing, but I believe the “roll your own” sector is in a completely different situation.

Cam Gordon

I think PC are going the same way as cars… people dont buy a car every year, they buy them every 5-10 years. I see PC becoming the same way and it was only a matter of time.. It is the companies fault for not expecting something like this. The part that sucks is that the consumer is gonna suffer for it.

Cam Gordon

I think PC are going the same way as cars… people dont buy a car every year, they buy them every 5-10 years. I see PC becoming the same way and it was only a matter of time.. It is the companies fault for not expecting something like this. The part that sucks is that the consumer is gonna suffer for it.

JD Rahman

Let’s not forget that most of the world is bankrupt. Large companies, public sector don’t have the luxury of replacing aging desktops in todays economic climate.

More and more businesses are implementing application virtualization – replacing desktops with Thin Clients, which have a much longer life cycle, compared to desktops. This isn’t just because virtualization had suddenly become viable. App virtualization has been around for 20 years – but there was no need to go down this path, as there was plenty of money for IT departments to just continue to replace PCs every 3-5 years.

(looking at your graph, HP & Dell marketshare went up. So how is it that you’re saying their marketshare went down 4% & 5% respectively?)

Finally, lets not forget that tablets cannot fulfill office productivity needs. This is an environment that can only be served with Windows based devices. The application base, plus the need to connect to domains for security and control, just isn’t possible with todays tablets.

What I’m trying to say is, these numbers from analysts, with their uninformed reasoning, does not give a holistic view of what is happening.

Joel Hruska

“(looking at your graph, HP & Dell marketshare went up. So how is it that you’re saying their marketshare went down 4% & 5% respectively?)”

Dell and HP have a higher market share. Their *actual sales* dropped in both cases.

I am amused that you claim companies with a total view of the market including sales data the rest of us never get to see are “uninformed” due to holistic effects. These are the companies that track tablet sales, smartphone sales, and sales on a company-by-company basis worldwide.

I don’t always agree with analyst reports, but they’ve got far more access to a much wider data pool than you or I.

Jurassic

“explanations for why sales are cratering have nothing to do with Windows 8, ultrabook prices, or weak macroeconomic conditions. The problem, in a word, is tablets.”

Don’t dismiss Windows 8 as a contributing factor.

If the problem was just “tablets”, then Windows 8 tablets (Microsoft Surface and others) should be selling like hotcakes… but they are not!

Joel Hruska

Apple’s shipments in the US at least were down about 5% and Windows tablets, including Surface, are much more expensive than their Android counterparts, which start at $149.

Apple’s sales might be UP sequentially (quarter-on-quarter) while still falling year-on-year. That’s precisely what happened in the United States for several companies.

davelalande

The fact is that tablets are consumption devices and most people consume. It’s much more convenient at home to carry a tablet from room to room than sit at a PC to consume content.

Another thing I believe is people have finally caught on that Microsoft has been renaming things and moving them around, then blessing their OS and Office app as “upgrades” and “new versions”. All this does is frustrate the users. There have been very little innovation injected into these products in the last ten years. Why should you “upgrade”?

Additionally, more and more is going to the cloud. All you really need for the cloud is a browser. Google has got the right idea with Chromium.

This is all very bad news for the PC.

Phobos

This whole issue of the PC sales in trouble are the same as the one from AMD is not over until the fat lady sings. Maybe in the next couple of months I might buy a laptop. I was thinking of a tablet, but then I though even an inexpensive laptop can run circles around a tablet and for a lot less so why bother with a tablet?

It would be nice if they could benchmark tablets vs inexpensive laptops. Given the price range of $299 to $999 for some tablets, it begs the question if you are getting rip off.

Joel Hruska

Phobos,

I brought this up in my review of the Samsung Ativ, a Clover Trail tablet, and again when I reviewed Surface Pro’s battery life and power consumption. Win 8 tablets, however, are the only tablets that can be easily compared to laptops. Samsung has an x86 tablet coming, but it’s going to be using Android, which makes it harder to compare against Windows.

Joel Hruska

Phobos,

I brought this up in my review of the Samsung Ativ, a Clover Trail tablet, and again when I reviewed Surface Pro’s battery life and power consumption. Win 8 tablets, however, are the only tablets that can be easily compared to laptops. Samsung has an x86 tablet coming, but it’s going to be using Android, which makes it harder to compare against Windows.

some_guy_said

Even geeks are having a hard time dropping $500 to $1000 for a 30-50% boost on their 4 year old computer. It’s not like your computer speed doubles every two years anymore.

It. is. simple. economics.

Plus, tablets are slowly replacing ~ 2/3 of all pcs.

Even in my home…we peaked at 2 towers, a laptop, and one tablet pc/laptop. but eventually, it will be a tablet pc/laptop, a single tower, and an Arm tablet (Between two people).

Not only are tablets of various types taking over in my enthusiast home, the total number of devices is also shrinking.

Ryan

One problem is windows 8.. If they would bring back the old desktop and familiar interface i think it would be better.. Also companies who build the hardware.. Most of the build quallity of todays laptop are really bad compare to models 2 or 3 years ago.. Gone are the days of laptops like sony Z series… And so many transformer clumsy configurations…

seadrive

I have to also agree regarding pc sales and such…I have the same socket 774 quad core pc for 4 years now, I have upgraded the graphics card, but the machine itself is still quite powerful. Also regarding laptops, I’ve bought older lenovo(think pads) off of Ebay the last several years, a $300 used lenovo that originally cost $2-3,000 a few years before is far more reliable than any new $600 laptop. There is no real need to buy the latest and not greatest these days. Since the 90s, PCs were the only means to communicate, email, etc with others, so people were forced to buy them even though they didn’t need them for productivity. Today, you can get onto twitter on any new phone, tablet or even xbox 360. Like I have mentioned before, many kids do not know what the start button is on a pc, for they never use them anymore…but they interface with their phones within every few minutes like a drug addict to a needle.

Joel Hruska

If you’re still on a Core 2 Quad, you’d see an enormous performance boost from jumping to modern hardware. Single-thread performance gains of 40-50%. Multi-core performance gains of up to 2x, given the addition of hyper-threading, superior single-thread performance, and higher clock speeds.

Joel Detrow

The point is that it’s still enough for their needs, despite software upgrades. 10 years ago, a 4 year old PC was practically useless.

Joel Hruska

I bought my first PC (meaning, with my own money) in 1997, when they dropped below $1000. Trust me, I remember the agony of my family’s aging 386SX 16. ;)

seadrive

Regarding Windows 8, frankly Microsoft has been sleeping on their asses like a confident lion while the Hyenas are taking over in numbers, they finally woke up, but in a panic of joining the touch revolution that’s replacing a mouse(that I think is a joke regarding productivity unless you’re a futuristic cop in Minority Report) simply forgot about it’s current fan base…however, 8.1 does fix several fixes or quite simply stay with Win 7.

seadrive

…another thing I would add regarding industry and being smart is Microsoft offers upgrades continually to the life cycle to your Windows OS; however, owners of Tablets and new phones are upgrading like every two years or so, due to more demanding apps, reduced battery life or aging processors that are now sluggish. This sort of upgrade necessity used to be a part of Windows owners until Win 7 of course, but never at a two year pace that’s present for most tablet/smart phone owners.

seadrive

Joel, I’m not saying that my socket 775 Intil Q9950 processor is as fast as a current offering; however, I must say that this chip is still plenty fast. I run games usually from consoles now, thus don’t really need the newest and best…the only thing I have done was replace the motherboard with a new one this year…I also want to add that it’s not pc users that are leaving the desktop, it’s simply the non-teckie user who goes on the net and facebook simply for social needs. The mouse is also being overshadowed since it’s been used since the middle 1980s with the first Macintosh, Atari ST and Amiga…the new novelty is touching your screen with their greasy fingertips. Will PC’s die? No, they are still vital in offices, but are not as vital in the home anymore…kids used to get parents to buy pc’s for school in the past, yet they were simply for games. Kids no longer do homework and rather just text, Skype and Facebook on their phones that are in their pockets.

Asok Asus

Hard to believe Windows 8.1 hasn’t reversed the slide. I’m stunned I tell you! Stunned! Oh, wait! Windows 8.1 hasn’t even been released to RTM yet! Well, in that case, I’m SURE it will save the day when it is finally released. After all, it’s not like the well hasn’t already been poisoned with Windows 8. And it’s not as if no one wants a Windows operating system on their slabs, because after all, Windows on PCs has been such a pleasant experience for the average consumer. And I’m almost positive that once Windows 8.1 arrives, the millions of consumers who turned off their PCs when they bought an iOS or Android device that just works will be perfectly happy to reconsider using an OS that is bug ridden, balky, and virus prone.

Oh, yeah, I forgot all the new bizzaro form factors for PCs and laptops. I’m sure those gimmicks will save the industry. Oh, and if not, then touch on the PC should save it right? Even though touch on the PC is about as useful as teats on a boar hog. Actually, less useful. Does Microsoft really expect 100 million CAD/CAM designers, accountants, and other industrial content makers to hold their arms up horizontally all day inaccurately poking smudges on their 42″ monitors with their fat fingers, working at 1/100th the speed as before Windows 8 with 1000 times the physical effort, in the mean time destroying their neck and shoulder girdle? Touch is an extremely low bandwidth input method with horrendous inaccuracy and extremely harmful ergonomics when compared to a keyboard and mouse.

Still, I guess Microsoft DOES expect everyone to embrace this wonderful new input method after all. So it can save the PC industry.

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